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How to Make the Build, Buy, or Outsource Decision

It’s been said that the secret to company growth is customer service. Just look at the success of global companies such as Nordstrom and Amazon.

The former is famous for making every customer feel special and has posted impressive revenue growth compared to industry peers. Likewise, Amazon’s customer experience obsession positions the online retailer as a customer favorite year after year. In fact, analysts believe that 50 percent of all U.S. households will own an Amazon Prime subscription by the year 2020.

While most companies can only dream of customer growth like Amazon’s, it’s critical to realize just how much a customer-centric growth strategy can fuel impressive success.

Expansion options

According to the 2015 Deloitte Global Contact Center Survey, contact center growth is on the horizon, with a heavy emphasis on consolidation, outsourcing, and/or establishing new centers. With increasing business pressure to grow, there are essentially three ways to expand to support your desired brand, create customer fans, and generate revenue: buy (acquire), build (invest), or outsource (partner).

Buy (acquire): Acquiring a customer service operation means access to an existing talent pool that already speaks the language and understands the cultural nuances of the customer base. This gets your support needs met fast with instant infrastructure, technology, and people. However, you also inherit existing systems, potentially sacrificing the ability to tailor the business in the short term.

Build (invest): The build option gives you complete control over infrastructure, branding, and hiring from the start. This strategy works well for companies that need to move at their own pace, operate in locations without viable buy or outsource options, and/or feel the need to protect their culture by retaining only captive operations. However, the build method takes time, a luxury many companies don’t have. Finding the right location can be challenging, so it’s critical to assess local labor pools, skill sets, competitors, real estate terms, economic incentives, and more.

Outsource (partner): Once largely a cost optimization play focused on non-core business processes, outsourcing has evolved to address the entire business value chain. The benefits include almost instant access to new markets, multilingual skill sets, expanded customer contact channels, and the latest technology. However, outsourcing requires a commitment to finding the right partner and then nurturing that partnership over time to truly represent your brand.

How to decide?

Knowing your expansion options is a good start; knowing how to make the right decision is the true test. For example, when TELUS International looked to expand its global BPO operations to meet growing client demands, we started with a list of more than 200 countries and an equally long list of targets. The following four-step process helped us plan for success from the start.

Strategic rationale (the why): It’s critical to know what specific business need is driving you to consider expansion in the first place. The why is your strategic rationale and the foundation underpinning your expansion strategy. Equally important is considering the alternative of doing nothing. If you fail to act, what are the risks? Will customer service suffer? Will competitors win out? If there are risks that you cannot take, then doing nothing is not an option.

Commercial efficacy (the rigor): Establishing analytical rigor around your decision means defining a strict set of criteria upon which to filter the options. For our expansion, we examined four key areas during our elimination process: demographics (e.g. literacy rate, labor pool), economics and regulatory risk (e.g. country stability, tax environment), business requirements (e.g. competitive landscape, technology infrastructure), and strategic alignment to our customer and business needs.

Economic data (the value): This is the time to analyze the benefits and risks associated with each option using relevant data, while factoring in anticipated cost and revenue synergies. This is also the time to develop an ideal target profile to determine what the ideal operation would look like.

Post-integration (the how): Whether it’s an acquisition or outsourcing partnership, you must develop a robust plan to integrate leadership, people, operations and technology. This step is so important that it continues to be a major pitfall for many organizations with more than 70 percent of M&A transactions failing to deliver (and often destroying) shareholder value.

Putting customers first

The success of your business is based on meeting customer needs; therefore, any growth strategy must avoid putting that success at risk. Let strategic rationale be your guide and post-integration be your blueprint for long-term success.